Politicians Promote Fossil Fuels with Half a Trillion Dollars a Year

Human Wrongs Watch

By Baher Kamal*

Apparently, hypocrisy has not limits—politicians everywhere, specially in rich-industrialised countries, look serious when they talk about their alleged, firm intentions to reduce fossil fuels devastating pollution, produce ‘clean’ energy and save humankind from the impact of climate change. Meanwhile, they spent about half a trillion dollars last year supporting the production and consumption of a major polluting source–fossil fuels.

Anacortes Refinery, U.S. - Image: Walter Siegmund (talk) | Wikimedia Commons

The recovery from the worst economic crisis of our lifetimes remains fragile”, said Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development (OECD) on Oct. 4 in Paris during the launch event of its Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels.

Meanwhile, the room for policy manoeuvres is increasingly limited, especially in more advanced economies. In the context of fiscal consolidation efforts, effective public spending becomes critical, he said.

Nevertheless, “Governments and taxpayers spent about half a trillion US dollars last year supporting the production and consumption of fossil fuels. Removing inefficient subsidies would raise national revenues and reduce greenhouse-gas emissions,” according to OECD and IEA (International Energy Agency) analyses.


Phasing out fossil fuel subsidies is a win-win for the economy and the environment, said Gurría.

“There are very few quick wins though. And one of them is the reform of fossil fuel subsidies. This can contribute to achieving economic and fiscal objectives, while also tackling environmental problems like climate change.”

A Way to Reduce Emissions; Increase Economic Efficiency

The new OECD analysis using International Energy Agency (IEA) data shows that “phasing out subsidies to fossil-fuel consumption alone could reduce greenhouse gas emissions by 6% in 2050 compared with business as usual, while increasing economic efficiency.”

This Inventory also provides a critical input to G20 countries as they follow-up on their 2009 commitment to “rationalise and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption,” says the Paris-based OECD, which groups 34 most industrialised countries, the vast majority of them are Western powers.

The G 20 Usual “Cackle”

The G-20 Leaders in 2009 agreed to phase out subsidies that “encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change”.

But reform requires first knowing the nature and scope of the subsidies. As the adage goes, “what gets measured, gets managed”, said Gurría. And this is why measurement of support for fossil fuels is so important.

Subsidies Monitored Also in Industrialised Ones

While estimates for fossil fuel consumption subsidies in many emerging and developing economies have been available, until today there was no data on fossil fuel support in advanced economies, according to OECD.

The OECD Inventory identifies more than 250 mechanisms that support fossil fuel production or use across 24 OECD countries. Many of these policies are provided at the sub-national level – states, provinces, Länder – which is itself a crucial finding.

Covering 24 countries, which account for about 95% of OECD’s total primary energy supply, the Inventory shows that 54% of this support was for petroleum.

Up to 75 Billion Dollars a Year

And here comes the critical point “We [OECD] estimate that the annual value of the transfers [subsidies] generated by these policies has ranged from about USD 45 billion to 75 billion a year in recent years. This wide range is, in part, influenced by the price of crude oil.”

In 2008, when oil prices peaked at over 140 dollars a barrel, the support for fossil fuel production and use had risen to around 75 billion dollars. In 2010, when oil prices were lower, the total support dropped to around 60 billion dollars, it says.

Removing inefficient subsidies would raise national revenues and reduce greenhouse-gas emissions, according to OECD and IEA analyses.


Gurría and IEA executive director Maria van der Hoeven emphasised that subsidies to fossil-fuel consumers often fail to meet their intended objectives.

These are: alleviating energy poverty or promoting economic development, and instead create wasteful use of energy, contribute to price volatility by blurring market signals, encourage fuel smuggling and lower competitiveness of renewables and energy efficient technologies.

In a period of persistently high energy prices, subsidies represent a significant economic liability,” she said, noting IEA estimates that “subsidies that artificially reduce the price of fossil-fuels amounted to USD 409 billion in 2010 – almost USD 110 billion higher than in 2009.’

Phasing out fossil-fuel subsidies will also provide an impetus for investment, growth and jobs in renewable energy and energy efficiency.”

The More Industrialised, the More Taxes Are Wasted

While big emphasis has always been put on developing countries, the fact is the the most industrialised ones have been wasting huge amounts of citizens’ taxes to subsidies fossil fuels industry.

Germany’s subsidies to hard-coal mining totalled 4.9 billion in 1999. In the same year France spent more than EUR 1 billion. In the United States, support for energy producers was about USD 5 billion on 2009.

The OECD talks, however, about these countries plans to gradually reduce that spending.

Anyway, a report by the IEA, to be published in the World Energy Outlook 2011 on November 9, demonstrates that phasing out subsidies to fossil fuels, if well-executed, can generate important economic, energy security and environmental benefits.

The ‘Bigs” Are Worried, But…

In 2009, the G20 expressed concern with “inefficient fossil fuel subsidies that encourage wasteful consumption”, which G20 countries have declared their intent to “[r]ationalise and phase out over the medium term”.

A similar commitment was made by leaders of the Asia-Pacific Economic Cooperation (APEC) forum in November 2009.

And through the OECD’s 2009 Declaration on Green Growth, 34 countries declared that they would “encourage domestic policy reform, with the aim of avoiding or removing environmentally harmful policies that might thwart green growth, such as subsidies: to fossil fuel consumption or production that increase greenhouse gas emissions …”

So far, so good. But, is it about cackle as usual? Can politicians really harness the unlimited greed of giant oil companies? And last but not least: why all this campaigning against subsidising fossil fuels? Are politicians eager now to devote citizens’ taxes to further subside the so-called “biofuel”, e.i., burning harvest to feed cars? (2011 Human Wrongs Watch).

*Baher Kamal, Human Wrongs Watch editor and publisher, is an Egyptian-born, Spanish national, secular, anti-war journalist.

Also read:

Save The Planet? Just Eat Cars, Drink Fuel!

UN to Asia-Pacific: Embark on Green Economy Now, Please!

OECD related news

OECD Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels.

2011 Human Wrongs Watch

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